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American Water (AWK) Pennsylvania Arm Acquires Water Assets

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American Water Works Company (AWK - Free Report) announced that its subsidiary, Pennsylvania American Water has acquired the water assets of Winola Water Company in Wyoming County. This acquisition will add 28 water customers to the company’s existing customer base in Pennsylvania. Since December 2018, it has been operating the Winola Water System under a receivership.

Pennsylvania American Water has already invested $325,000 in infrastructure upgrades to Winola Water Company. The company now aims to replace pipelines in the distribution system and install meters at customers’ properties.

Pennsylvania American Water currently provides reliable water and wastewater services to more than 2.4 million residents in Illinois. Year to date, the company has completed four acquisitions to expand operations in Illinois. It has also invested nearly $88 million since January 2020 in different projects to upgrade and strengthen the existing operations.

Water Industry Needs Consolidation

The U.S. water utility industry is highly fragmented, and consolidation in this space can bring in the much-needed investments for upgrading as well as repairing this aging water and wastewater infrastructure. Per the Water and Wastewater Equipment Manufacturers Association, an estimated $750 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years.

American Water is quite active in acquiring small service providers. Till Nov 3, it added 47,100 customers to the existing customer base, out of which 10,900 customers were added through the organic route. The company is planning to invest $8.8-$9.4 billion in the 2020-2024 time period and $20-$22 billion in the next decade to upgrade and maintain its infrastructure.

Another water utility, Essential Utilities (WTRG - Free Report) has not only expanded water and wastewater operations through acquisitions but also ventured into the natural gas distribution business through the acquisition of Peoples. The company aims to invest more than $2.8 billion over the 2020-2022 time period to rehabilitate and strengthen water, as well as gas infrastructure. Other water utilities like California Water Service Group (CWT - Free Report) and Global Water Resources, Inc. (GWRS - Free Report) are also taking the inorganic route to expand operations in the United States, as well as making investments to upgrade infrastructure.

Price Performance

Shares of American Water have outperformed the industry in the past 12 months.

Zacks Rank

The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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